These are unprecedented times. I'm not entirely sure what the current WBI means, in this context. The GDP is down 33%. If the GDP is just a blip and returns to previous levels, it's possible this WBI is reasonable. If the GDP doesn't recover much, this WBI is strataspheric. Meanwhile, interest rates are record low. That suggest the market can sustain a higher WBI than when rates are higher. How much higher is not known to me but I would think a fair bit. On the other hand, the GDP is down 33% and the market keeps blowing up like a balloon. That seems wildly wrong. We are at the cusp of wide spread industrial disruption. That ought to scare the market also, but clearly does not.
This is for people who are having a hard time beginning an investment journey. So many opinions. So much confidence. Who to believe? Believe yourself. The people who are hyper aggressive and hyper confident seem to have an extremely clear and precise view of the future but keep in mind they are wrong the majority of the time. They will declare themselves correct but they are not. And yet, they make a lot more money than I ever have? No. They don’t. Reports of massive returns and for years on end are universally crap. Not everyone can be above average and yet, if you believe what you read, everyone is. The people who have done well the most consistently over the last several decades have been index investors and those who have simulated the indices. VOO hasn’t been around forever. Low fee ETFs haven't been around all that long, either. Back in the 1980s, when I started, people would buy the DJIA or a portion of the S&P 500 they felt to be representative. That approach, coupled with regular saving, has proven successful over my lifetime. Every one of those people have done very well. They have done as well as the American economy. If you don’t know what to do. If you aren’t confident in how to move forward. Put 25% of your portfolio into VOO, regardless of the current price. That will loosely tie your fortunes to the American economy. That’s a good place to be. If the market crashes in the next 6 months, Put the rest of your money in at that time. If it doesn’t, put another half of your nest egg into VOO after 6 months of watching, even if it is much higher than the first tranche. Once you have a chunk of money invested, you can take it from there. By the end of the first year, you will have some ideas and comfort with investing. What NOT to do: - buy based on an Internet hot tip - buy companies you do not know or understand - buy based on hype or buzz around the office - try to mimic another person - trade actively - “balance” your portfolio by selling more successful equities and buying more of your less successful ones What to do: - think for yourself - believe in yourself - try to remain objective about your knowledge domain and your own abilities (hubris is the road to failure) - disregard everyone else’s claims of proficiency as well as their claims of superiority - understand you do not have the “hot hand” and will not outperform the market - understand you can buy an index, accept a decent and reasonable return, and outperform essentially all people who brag about having the “hot hand” with investing - forsake the money you invest (do not put your money in and out of the markets) - remember: all that matters is what happens in 10, 20, 30 years with micro factors being irrelevant
There's a new trend towards sentiment. Funds investing in politically correct, and green environment holdings. Maybe not for me. I buy stocks in companies without regards for the company's impact on the world. I purchase products the same way. If I invest in Raytheon, I don't think about who those missiles will strike. I don't care what the CEO's race is when buying lumber. I drink Coke. I own the stock. Childhood diabetes is not on my mind.
Not sure how interesting or relevant this is but I will share our cash level. Our cash is down to about 19%. Our cash has been slowly building for months but the cash ratio is down because our holdings are going up like a rocket. The pandemic and economic collapse have been awesome for the market. lol! It doesn't make any sense that our portfolio is valued where it is but we will continue to hold.
I do my best to extol the benefits of objectivity and I do try to walk that talk. Frankly, I feel I do a better than average job of being objective, including insights into my own numerous flawed thought processes. This post is not a story of my success. lol! I've followed SpaceX and Tesla since the beginning but didn't start following Elon Musk until 2008, when he became CEO of Tesla. In the early days, he did an amazing job of PR and was a man to be admired. Back then, I knew he would fail but adamantly cheered for both him and Tesla. To be honest, I didn't think SpaceX would succeed at first, either. The last couple of years, I find myself seeing that Elon Musk is, occasionally, a royal asshole. He has his endearing moments and plenty of redeeming traits but there are times he is ignorant, arrogant, self centered, and head strong. It does cool me on Tesla a bit but not even close to enough to sell our holdings. Today is month end so I'm recording a bunch of statistics I've been tabulating since 1996. It started in the 1980s with Lotus 1-2-3 for DOS but, somehow, I lost the file in 96 and started again. That original file was created in Excel 5.0 for DOS. It's a simple system that I've made a point of not changing, over the years. I added a few fields in 2004 (S&P 500, for example) and the WBI in 2011 but it's basically the same 40 columns of spreadsheet data I've been adding a row to each month for all these years. It has been invaluable. Anyway, Tesla started at about 0.5% of our portfolio. It was basically a rounding error. I added a lot in early 2019 but it wasn't a major player in our portfolio, even then. Now that it has grown 12x, it is our fourth largest holding. It's about 1/3 the value of our largest holding but not far behind the third position which it could easily overtake. Now that I think of it, Elon is a pretty classy guy. Take no prisoners on Twitter, Elon! Funding secured!
I've been thinking about the SpaceX StarLink satellite constellation and it's impact on the world. I believe SpaceX can hurl 60 StarLink satellites into orbit for about $11M, including the cost of the satellites. They are pushing launch envelopes, reusing fairings (even when they land in the ocean). I believe the cost per launch, including satellites is under $11M. That comes to $184K per satellite. Consider $184K per access point as compared to the cost of a cellular tower. Cell towers are $1~3M, depending on a variety of factors. Imagine the disruption and profitability of StarLink.
The WBI was 175 last night. It's still high but we don't know where the economy will be when Q3 numbers come in. If GDP increases by 20%, a reasonable number considering it went down 33%, the WBI will be somewhere around the very top of the window of sanity. Right now, the WBI isn't the most clear indicator. I wish to point out that, even during times like this when the WBI is through the roof and the economy is in deep trouble, we still look for value and we even expressed interest in an IPO in July. Macro factors matter but they are not everything. It still comes down to this: If you own well run companies, purchased at a price that isn't ridiculous, you will do well over time. BTW, that IPO will fill sometime around the end of the year.
I'm going to add a video by Bill Ackman to my blog because I consider it to be a brilliant introduction to investing. Everything related to low level value investing is here and he even touches some more advanced topics. There is literally nothing I could say to add to this, from an introductory point of view. Even from a more advanced point of view, I don't have all that much to add.
From what I can tell, we are now close enough to the election that politics are the primary driver of the market. It's a bit difficult to know what will happen if Biden wins. The response will be somewhere between a small, short-term dip and a small, brief surge. Trump winning looks to have the same profile of possibilities. Either way, I expect political influence on the market to end in March. I've put together a few timelines with trends but I seem to be the only one interested in political influence on the market so I shall keep them to myself.
I appreciate your view Tom.......but......I have been on money boards in the past that were CONSUMED by politics and that chased away half or more of the posters and killed the board. And.....as a long term investor....there is nothing I can or will do in my accounts based on politics. I will simply have to live with the result and watch others live with the results. SO......since this is something that I have ABSOLUTELY ZERO control over and will simply have to live with.........I try to avoid discussing politics. I have no problem with you or others that want to talk about the election and expected impact on the economy and investing. It is just NOT something I care to do.
I've discussed political influence and my plan for the election multiple times and the impact I see on the market, so you're not the only one.
